A6.969 Tips and service charges

Administration and compliance

A6.969 Tips and service charges

A6.969 Tips and service charges

HMRC is aware that employees who work in the service industry receive tips and that often those tips are paid without deduction of tax by the employer. Where the employer is involved in distribution of the tips, HMRC will expect tax and National Insurance to have been accounted for using the PAYE system.

HMRC has identified payments for tips, gratuities and service charges as requiring particular attention1.

Employees may receive tips and service charges in many ways including:


    •     cash tips left or handed to them by customers


    •     cash tips shared through a pooling arrangement



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